orissa in a globalised economy_manas

7/29/2019 Orissa in a Globalised Economy_manas

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ORISSA IN A GLOBALISED ECONOMY - CHALLENGES AHEAD

"The government has signed more than 60 Memorandum of Understanding (MoUs) with different

players. The setting of new projects has led to a large-scale displacement of the marginal farmers

because of their land being snatched away with the collusion of State machinery and the

corporates."

Globalisation and economic reforms have made a direct impact on all the segments of the backward

states like Orissa. The industry, agriculture and the financial sector have been impacted alike. The

market forces have forced several small and medium scale industries and Public sector undertakings

out of race. The rural sector is also not getting a proper price for their agricultural produce because

of the traditional farming. And, the poor economic factors have led the financial sector specially the

banks to squeeze their operations.

The globalization has led to economic disparity between the rich and poor states like Orissa. The

economic backwardness at the geographical level and the gulf between the rich and poor at the social

level has its social cost – increase of violence in the civil society and the manifold growth of the

radical left extremism in the State. In this backdrop, it is advisable to analyses each segment of the

State one by one.

Industry

The unrestrained market competition was responsible for the closure of several state owned

companies in the state. According to the state economic survey for the year 2007-08, only 32 state

owned companies are working out of the total number of 66. The total work force in the organized

sector has dipped from 7.98 lakhs in 2000 to 7.41 lakhs in 2006. There is no proper data available on

the status of small and medium scale industry in the state.

Contrary to this, a new trend has emerged in the state over the year. The abundance of natural

resources and cheap labour has attracted the global players like Posco and Vedanta along with local

mega players like Tata to set up their shops in the state. The government has signed more than 60Memorandum of Understanding (MoUs) with different players. The setting of new projects has led

to a large-scale displacement of the marginal farmers because of their land being snatched away with

the collusion of State machinery and the corporates. Local people are still putting lot of resistance in

these areas.

The State government should analyse whether these projects will benefit the people of the state or it

will further worsen their misery before allowing the work to continue in these projects.

Orissa government must take a leaf from the experiment of Enron led Dhabol Power Project in

Maharashtra before entering into MoUs one after another. The Rs 13,000 crore power project in

Maharashtra is still hanging in limbo because of the unreasonable conditions put forward by the

Enron company which the bureaucracy could not understand while signing the Power Purchase

Agreement (PPA) in 1992. The dollar linkages with the total cost of the project and fuel prices were

the two main reasons for the non-operationalisation of the project.

It is a challenge for the government to safeguard its own industry from getting further effected due to

the opening of the economy. And, it must be very careful while entering into any MoU with any

mega player. The government machinery must take the advice of the professionals in accounting and

legal sector while giving a final shape to the project.

Agriculture

The agriculture sector is the second causality in the globalised economy. The agriculture produce is

not able to compete within the domestic market leave the global market due to the absence of a proper rural infrastructure and commodities market.



Here, challenge lies before the state to develop a proper infrastructure for the development of

agriculture sector of the state. The farmers need a proper warehousing to keep their agricultural

produce which demands a regular supply of electricity. Proper roads are also required to transport

these agricultural

produce.

Orissa should learn lessons from Gujarat and Maharashtra which has a very strong information

network to provide the market prices to the farmers on hourly basis. This helps the farmers in getting

the right

price for their produce.

A strong political will is required on the part of the government to develop a local market place

where farmers can sell their produce on the lines of rayatu bazaru in Andhra Pradesh. At present, the

marketing of paddy only is being done in Orissa which can be extended in other agricultural crops

like rice, oil seeds etc.

Financial Sector

The globalization has weakened the financial sector to a great extent. The tough competition haswrecked the financial conditions of the co-operative banks. According to the "Report of the

Committee on Financial Inclusion January 2008" prepared under the chairmanship of Dr C

Rangarajan, chairman, economic advisory council to the Prime Minister shows that only two districts

out of 30 have a strong presence of the commercial banks. The overall indebtness to formal sources

of finance is only 20% in the Eastern region including Orissa meaning thereby the grip of the

traditional moneylenders is very strong in the state.

A strong banking networking is a must for the overall growth of the state. Because, they help in

credit delivery and bringing transparency in the financial dealings of the people. The popular

government schemes can be successfully implemented only with the presence of a strong banking

network.

The implementation of Basel II in the year 2009 will further make the weak banks difficult to

operate in the State. The weak banking network is responsible for the mushrooming of the micro-

finance institutions in the state who charge abnormal interest rate ranging from 20% to 28% as

against an average interest rate of 15% by the banking network.

The state government should convince both the Union finance ministry and Reserve Bank of India

(RBI) to take special measures so the banks will open new branches in the backward regions of the

state.

Social Sector:

The state allocation on social sector too has come down drastically.

(A) Education:

• Allocation for School and Mass Education as a share of total state expenditure reduced to 10.66

percent in 2008-09 from 12.20% in 2005-06 and as a share of GSDP it hovered around 2.5%. It is

worth mentioning here that the expenditure on education sector should be a minimum of 6% of

GSDP. During 2006-07, Rs. 1341.86 cr was allocated to this sector and in the current budget

estimates, this has gone up to Rs. 1837.62 cr., which is a meagre 1.78 % of GSDP.



 As a percentage of total state expenditure, the projected expenditure on elementary

education decreased to 6.58% in 2008-09 budget while it was 6.94 during 2006-07. During the last 5

years the allocation towards elementary education as a percentage of total state expenditure has been

decreasing which in turn will affect the quality of primary education in the state.

 Allocation for higher education decreased from 2.27 percent of the total state expenditure

in 2005-06 to 2.04 percent in 2008-09 budget estimate. As a percentage of GSDP it gives no such

encouraging increment (0.53 percent during 2006-07, 0.55 during 2008-09).

The State government should pay proper attention in developing good professional and vocational

workforce for a competitive market place. It should work with the private sector for imparting

English language and IT education which has become a pre-requisite for getting a job in a market

economy.

(B) Health

• During 2006-07 Rs. 590.51cr. was earmarked for health and family welfare department and this has

increased to 1004.79 cr. In 2008-09 BE. The total allocation is less than 1% of the GSDP (0.97%).To achieve the target specified in Millennium Development Goals (MDGs) declaration towards

health sector, that the expenditure on health sector should be a minimum of 3% of the GSDP.

• What is worse is that the distribution of funds within the health department in 2007-08 is quite

discriminating towards the rural health services. The share of rural health expenditure has decreased

to 30.55 percent in 2007-08 from 41.29% in 2005-06. There is a scope for changing the prioritization

of rural health over urban health in allocation of fund to the health sector at the stage of passing of

the budget. Rural health sector needs prioritization to overcome the problem of high Infant Mortality

Rate (IMR), which is now 75 per 1000 as against the national average of 58.

 Health status is an essential part of people's well being and health shocks are a major cause of sinking into poverty. One key way of making growth inclusive is helping the benefits of

economic growth and prosperity translate into concrete gains in survival of children and their

mothers, improving their nutritional status; and reduced exposure of households to economic

vulnerability from health shocks.

The must pay enter into public and private partnership for meeting the expectation of the people in

the health sector.

Participatory Democracy - Need of the Hour

The state government needs to meet the challenges in different fields. All the concerned agencies – state government, media, NGOs and other similar agencies - must launch a massive awareness

campaign related to various issues. The change of mind-set is important to overcome all the

challenges.

Only a participatory democracy can help in meeting the challenges of the globalization. And, the

participatory democracy can be possible by intensifying the democratic process and bringing

transparency across the board.

A paradigm shift is also needed from an individual centric operations to the structural-

functional functioning to establish a just social order with double digit growth with

equity or what they call Inclusive Growth in the state.

"Economics is not just politics…. There is more to human progress than aggregate



statistics of growth. We have to ask the right questions and concentrate on what

matters to people” – Amartya Sen

orissa in a globalised economy_manas

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